WASHINGTON — The United States must reduce its budget deficit and Asian nations must encourage more consumption to prevent a recurrence of the global imbalances that contributed to the financial crisis, Federal Reserve Chairman Ben Bernanke said Monday.
Speaking at a conference on Asia and the financial crisis sponsored by the Federal Reserve Bank of San Francisco, Bernanke noted that those global imbalances — basically, Asians saving too much and spending too little, and Americans spending too much and saving too little — have dissipated in recent months.
But as the global economy recovers, Bernanke said, “global imbalances may reassert themselves.” To keep that from happening, the United States must “increase its national savings rate.” And the best way to do that, Bernanke said, is to reduce the federal budget deficit.
“Although we should deploy, as best we can, tools to increase private saving, the most effective way to accomplish this goal is by establishing a sustainable fiscal trajectory, anchored by a clear commitment to substantially reduce federal deficits over time,” he said, according to a text of his prepared remarks released by the Federal Reserve.
